Strategic Thought Transformation - The IIPM Think Tank

I N D U S T R I A L E S P I O N A G E
Knowledge of Foreign Entity: In the
family model, the “spy” almost certainly
knows the nationality of the foreign entity,
but not necessarily the actual identity of
the final consumer of the information. In
addition, there is no indication yet that the
overseas acquisition manager is required
to use a cutout manager.
Payments The record seems to indicate
that in some cases, a significant amount of
money is paid. In other cases, the “service”
is redeemed for privileges given to the extended
family in the home country.
2.3 Use of “Front” Companies &
Organizations
In many cases, the overseas acquisition
manager [or group] engages in setting up
so-called “front” companies in order to provide
a base of operations for their illicit
activities. In many western countries, it is
quite easy to set up a “company”. It requires
only payment of a small registration fee
and a little bit of paperwork.
One famous Russian spy, Richard Sorge,
set up a company in Japan that had imported
technology from Germany capable
of making copies of blueprints. 10 Not only
Russian spy,
Richard Sorge, set
up a company that
had technology
capable of making
copies of
blueprints
was this operation highly profitable, but
at the same time it allowed Sorge & Co.
to make copies of thousands of technical
engineering drawings brought in for copying.
The stolen information subsequently
was put on to microfilm, and through a
network of couriers based in Shanghai
found its way to Moscow. 11
Front companies provide a buffer between
the overseas acquisition manager and the
various recruited “spies” supplying the
stolen information. Front companies have
several advantages:
Legitimacy: Since these companies are
incorporated in the same country as the
target company, there is an aura of legitimacy
in their business dealings.
Hidden Ownership: Although these
companies are controlled from overseas,
either
1. Directly from the acquisition agency,
or
2. Through the overseas acquisition manager
[who in turn is directly controlled
from the home country], it is difficult
for the target company to discover
these relationships.
Hidden Control: In many cases, these
front companies are set up in a way in
which although they are in fact conducting
legitimate and real business, the actual control
of them is behind the scenes, exercised
indirectly in a way so that their corporate
leadership itself may not be aware of the
true nature of the business. In this type of
arrangement, the front company serves as a
“shell” or “launching point” for conducting
other operations.
Relationship Complexity: Different
from “consulting companies”, “market research
firms” and other information cockroaches
on the market, front companies are
able to establish with the target company
highly complex relationships and fake negotiations
that are intended only to pump
for information. Examples include:
1. Joint venture discussions.
2. Overseas “sales” relationships.
3. Outsourcing of manufacturing [to the
10
Blueprint: A blueprint is a plan or design documenting an architecture or an engineering design. The name comes from the photographic print, obtained through the cyanotype
process, which is composed of white lines on a blue background commonly used in the past for copying architectural plans and engineering drawings. Source: Wikipedia.
11
The Sorge network by any standard was one of the most successful operations ever. Not only highly effective, but clever. A somewhat similar operation was carried out by the Israelis
in Switzerland. Technical drawings of the new French Mirage jet fighter aircraft were sent to Israel and used to create the Kfir fighter jet. Only the Israelis did it even better. They
managed to take the originals of the engineering drawings and replace them with copies. There is coverage of this in the book Every Spy a Prince by Raviv and Melman [13].
An IIPM Intelligence Unit Publication 31